1 eFX Daily colour

1.1 FX Spot

1.1.1 Overview

(Feb-20) US President Donald Trump is urging Ukraine to quickly negotiate a peace deal with Russia, which has raised concerns among European allies about a potential shift in US support for Ukraine. Additionally, Trump has mentioned the possibility of imposing a 25% tariff on lumber, adding to the uncertainty in the market.

  • The US index ended the day higher (+0.14%), now trading at 106.96.

The rand fell by 0.63% to a high of 18.5933 after the budget was postponed to March 12 due to disagreements within the GNU over a proposed 2% VAT hike. The VAT increase aimed to reduce government debt, which stands at around 5.5 trillion rand, with interest payments consuming 22% of annual revenue.

In commodities, oil prices remain fairly unchanged, and Gold prices continue to trade in its all time high zones as investors look to diversify to safe heaven assets:

  • Oil trades at $76.09 per barrel.
  • Gold trades at $2947.90 an ounce, and has advanced for about 0.51% today.

Against the crosses:

  • EUR/ZAR kicks off at 19.2852
  • GBP/ZAR starts at 23.2916

1.1.2 US

(Feb-13) CPI print yesterday supported FEDs decision to hold rates steady and the general talks between US and Rassia to end the war has boosted risk sentiments.

(Feb-17) We saw a general USD weakness on Friday across the board which was related to various factors and optimism around de-escalating geopolitical risks, this however is still not yet confirmed.

(Feb-19) President Donald Trump announced plans to impose 25% tariffs on automobile, semiconductor, and pharmaceutical imports, with an announcement expected by April 2. He aims to give companies time to establish US-based operations to avoid tariffs. These new levies could significantly impact industries and lead to higher consumer prices, particularly affecting countries like Mexico, South Korea, Malaysia, and Singapore.

1.1.3 SA

(Feb-10) SA’s Finance Minister, Enoch Godongwana, will deliver the 2025 Budget Speech on Wednesday, February 19th. The speech will outline the government’s financial, economic, and social commitments for the year, focusing on balancing economic growth with support for vulnerable communities.

  • Saw the market aggressively rejecting the move lower in ZAR, but the RAND charged ahead to lows of 18.30s.
  • Very little support for Rand below 18.40.

1.1.3.1 eFX Volumes

  • Overall volumes

(Feb-17) Volumes improved towards the end of the week, with 3 days trading higher that the recent ADV.

(Feb-18) Pull back in volumes due to US holiday on Monday.

  • Price to volumes

(Feb-13) Clients ended yesterday being net-short ZAR: - Range for today: 18.60 - 18.30.

(Feb-17) Saw the market reject the move lower in ZAR, with implied topside at 18.65.

  • Liquidity hours across currency pairs
  • Currency positions

(Feb-10) Clients are now net-long USDZAR.

(Feb-11) We see continued net-long positions in ZAR.

1.1.3.2 USDZAR levels

(Feb-17) Saw the market reject the move lower in ZAR, however the the weaker USD on Friday (Feb-14) saw ZAR hitting lows of 18.2995.

  • However, there is little support for ZAR below 18.40.
  • VWAP for usdzar has moved from 18.70 to 18.50 and now at 18.40. This is a clear demonstration of the Rand inroads.
  • The rand is still working 18.30, but its not a lvl yet.
  • Range for today still at 18.60 - 18.30.

(Feb-18) ZAR made the expected correction yesterday to 18.45. Given that we failed to break above 18.50, a move lower but above 18.30 is likely.

(Feb-19) Rand set for a good day today as we see ZAR failing to break above 18.50 in the recent days.

  • We now trade below 18.40, with a general DXY weakness across the board.
  • Gold making some inroads, supportive of the rand.
  • Some risks exist on the budget speech, however, it has not had a historic major FX impact.
  • Geological risks easing.
  • Seeing ZAR at 18.50 - 18.30 for the day, with a potential break lower than 18.30 but above 18.25.

(Feb-20) Some budget highlights [which has now been postponed] included targeting a primary balance surplus to stabilize debt and raising VAT by 2 percentage points to 17%, which was expected to generate R60 billion annually and slightly increase inflation, which in turn, pushes the SARB rate cuts far out. Debt-to-GDP is projected to peak at 76.1% in 2025/26 before moderating to 74.8% by 2027/28.

  • Range for today: 18.60 - 18.30.

1.1.3.3 USDZAR spreads

(Feb-17) Volumes muted today as its a US holiday.

  • ZAR makes the expected correction to 18.45. Given that we failed to break above 18.50, a move lower but above 18.30 is likely.

(Feb-18) Rand shows zero interest of making moves today, we remain at that rand volume weighted price of 18.40.

(Feb-19) Spread remain wide as a result of the postponement of the Budget to 12-March.

1.1.4 Key events this week:

  • Australia unemployment, Thursday
  • China loan prime rates, Thursday
  • Eurozone consumer confidence, Thursday
  • G-20 foreign ministers meet in South Africa, Thursday - Friday
  • Eurozone HCOB manufacturing & services PMI, Friday
  • UK S&P Global manufacturing & services PMI, Friday
  • US S&P Global manufacturing & services PMI, Friday

1.2 FX Volatility Update

1.2.1 Update

By Thuto Mukena - Institutional Sales Specialist (Feb-20)

  • Overview

Local Implied vols had been steadily grinding lower this week as the market priced in the local budget as a non-event. However, what was expected to be a non-event turned into a non-budget. Just minutes before Finance Minister Godongwana was set to deliver his speech, headlines emerged about an urgent cabinet meeting, delaying the budget announcement to March 12 due to disputes over a proposed 2 percentage point VAT hike to 17%. This caught the vol market off guard, triggering a sharp repricing. USD/ZAR 1-week implied vol spiked by approx. 1.5 vol p.p as uncertainty took hold. On the day spot initially showed resilience, with the Rand firming to R18.3177/$ in early the early hours, but sentiment quickly turned as risk conditions exchanged hands. By the close, USD/ZAR had weakened to R18.5048/$, making the Rand the worst EM performer on the day after the Peso.

  • EM & G10

Tariffs and peace talks remain the dominant themes driving market sentiment this week. The key risk event of the day was the release of the Fed minutes, which reaffirmed that the Fed is in no rush to cut rates until inflation shows clearer signs of moderation. This backdrop continues to support strong U.S. dollar momentum across most pairs. On the implied vol space, both EM and G10 implied vols had a choppy session, with EUR/USD 1-week implied vol leading the moves as the euro remained under pressure amid U.S.-Europe divisions. USD/CAD 1-week implied vol also saw some action, the tenor edged higher, rising by 16bps from the open. In the high-beta space, USD/CNH 1-week implied vol led the move lower, dropping by 65bps, trailing USD/TRY 1-week implied vol.

1.3 Africa

1.3.1 Update

By sizwe Mfayela - Institutional Sales Specialist (Feb-14)

  • Egypt

    • IMF will consider Egypt’s Resilience and Sustainability Facility request at the same time when the IMF conducts the country’s fourth loan program review.

  • Kenya

    • Kenya widened its 2024/25 and 2025/26 fiscal year budget deficit estimates to 4.9% and 4.3% of GDP, respectively.

  • Ivory Coast

    • Ivory Coast started negotiations with Eni SpA over a new exploration block.

  • Nigeria

    • Nigeria’s January crude oil production rose to an average of 1.54mio bpd, up from 1.48mio bpd in Dec.
    • The Nigerian parliament approved President Tinubu’s NGN 54.99trio ($36.4bio) budget for the 2025 fiscal year, which is 9% higher from the NGN 49.7trio proposed in December. The government has also made a $200mio provision to fill the funding gap created by the US aid suspension.

  • Rwanda

    • The Rwanda central bank left interest rates unchanged at 6.5% for the second MPC meeting in a row as it sees inflation remaining sticky in the near term, with 2025 inflation estimated to average 6.5%.

  • Senegal

    • Senegal is in conversation with the IMF to secure a new program that is aimed to commence in June this year. the country aims to extend debt maturities and do debt swaps in efforts to reduce the debt to GDP ratio from almost 100% to around 70% of GDP in the next few years.

  • Zimbabwe

    • The IMF is engaging Zimbabwe on a staff-monitored program following a trip to the country from 30 Jan to 13 Feb to initiate discussions on the key parameters of the program. Zimbabwe currently has $21bio of external debt it defaulted on.

  • Eurobonds

    • Another strong session for SSA credit with decent volume trading overall.

  • NGERIA

    • A couple real money accounts stepped in to sell into what was a very robust local bid, and near the end of the day that local bid felt closer to filled, but street dealers were left short paper, and that maintained a bid tone to the curve.

  • ANGOL: Locals sold into ETF and street bids

  • IVYCST: Flows were relatively light, but overall turned two-way, with the bid for the $ bonds on the curve going softer.

  • KENINT: Some fiscal-related headlines yesterday but flows were muted, with locals net sellers of risk to add to the real money account selling.

  • SENEGL: Was very much in price discovery in a 3pt range since the headlines hit on Wednesday as bid and offers felt very skittish, forcing swift repricing on each print. Overall, SENEGL underperformed on the day with the curve bear flattening.

  • SOAF: An active session with headlines keeping flows on the curve two-way. US PPI came out higher than expected - after a higher-than-consensus CPI print yesterday - but that softened the bid only for a split second. Real money and ETFs were net buyers of risk, whilst there was selling from the street. Long-end continued to trade better, with front-end bonds catching a bid.

1.3.2 Economic data

Economic data releases